Or: the benefits of an Excluded Property Trust (EPT)
If you’re one of many Hong Kong-based people who are thinking about moving to the UK under the new visa available from January this year, you really need to stop to think about what will happen even before you step off the plane.
The UK has a unique take on the concept of “domicile”. It’s technically based on factors beyond the narrow limits of this short article but it’s not the same as “residence” which is a more transient idea.
Your domicile is where you really intend to stay and make your home and where you regard yourself as being from. People from the UK tend to find their domicile of origin is sticky and hard to shrug off, at least from a tax perspective. The UK tax authorities don’t easily give up on someone who has a domicile of origin in the UK, often leaving it until after the person’s death to determine what their domicile was.
This is because UK inheritance tax (IHT) which forms a big slice of the UK’s tax-take pie is based on a person’s domicile at the time of death. The UK Revenue wants to see where you died domiciled to assess how much of your estate is up for tax grabs.
Then, there’s domicile of choice and that’s where anyone coming to live in the UK needs to be wary. If you’ve filled in an official form gleefully advertising the fact that you’re moving to the UK and that you fully intend to make the UK your new home, that’s prima facie confirmation that you’ve elected to have a domicile of choice in the UK.
That makes you liable down the line to IHT. IHT is charged at 40%. This means that, certain exemptions apart, someone with a domicile of choice in the UK will be paying as much as 2/5th s of their estate on death to the UK Revenue.
There’s a simple solution – set up an Excluded Property Trust well before you land and do it in Gibraltar which has all the right connections to the UK, is virtually in the same time zone, has the same legal system and makes creating EPTs quick and easy.
By transferring your non-UK situated assets into an EPT before you elect to make the UK your domicile of choice, you can legitimately avoid having to pay IHT (or any other form of UK taxation) on that part of your estate when you die.
You need to do this in good time and on the back of sound tax and legal advice. Contact us for more information.
By Chris Pitaluga